In August 1996, the San Jose Mercury News published a series of articles,
entitled "Dark Alliance: The Story Behind the Crack Explosion," which alleged
that certain individuals associated with the Nicaraguan Contras had flooded South Central
Los Angeles with cocaine in the 1980s. The articles further alleged that these individuals
had used the proceeds from their drug trafficking to finance the Contras' war against the
Sandinista regime in Nicaragua. The articles made the startling claim that this drug
pipeline helped spark the crack epidemic in Los Angeles and throughout the United States.
More explosively, the stories implied that the Central Intelligence Agency (CIA) was aware
of these activities and either attempted to protect the drug dealing of these Contra
supporters or turned a blind eye to their activities. The articles also questioned how
certain individuals connected to the Contras were treated by law enforcement authorities,
including elements of the Department of Justice (DOJ) -- the Federal Bureau of
Investigation (FBI), the Drug Enforcement Administration (DEA), the Immigration and
Naturalization Service (INS), and various United States Attorney's Offices -- implying
that they were treated differently because of ties to the Contras or the CIA.

The articles focused on the drug operation of Ricky Ross, an African-American resident
of Los Angeles who was a major cocaine dealer. The series claimed that his meteoric rise
as a drug trafficker was made possible by Oscar Danilo Blandon and Norwin Meneses, two
Nicaraguan nationals with ties to the Contras who allegedly used the profits they earned
from selling Ross massive amounts of cocaine to help fund the Contra war effort.

Allegations of drug dealing by Contra supporters in the 1980s are not new, and they
have been previously investigated by various government entities and the press. The Mercury
News articles sparked renewed interest in such allegations, but the articles' chief
significance was their suggestion that the CIA and other agencies of the United States
government may have been responsible for the crack epidemic that ravaged the
African-American community in South Central Los Angeles and other communities throughout
the country. Although the Mercury News later claimed that it had not made the
allegation directly, the suggestion of government or CIA involvement in the crack epidemic
spawned calls for investigations about the claims suggested by the Mercury News
articles.

The DOJ Office of the Inspector General (OIG) conducted a review of the actions of the
Department of Justice that were implicated by the allegations in the Mercury News
articles. We did not reinvestigate the more general allegations of Contra involvement in
drug trafficking, which had already been extensively reviewed in previous inquiries by the
Senate Foreign Relations Committee's Subcommittee on Narcotics, Terrorism and
International Operations; the State Department; the DEA; and the CIA. Rather, we focused
our attention on the new allegations about the individuals described in the Mercury
News articles, including Blandon, Meneses, Ross, and Ronald Lister, an associate of
Blandon. The articles raised numerous questions concerning whether Department of Justice
employees, including employees from the DEA, the FBI, the INS, and various U.S. Attorney's
Offices, properly investigated and prosecuted these individuals or whether they were
protected because of ties to the Contras or pressure from the CIA.

We also reviewed related allegations raised by the articles about the actions of
Department of Justice employees in other cases, including the claim that $36,000 was
returned to convicted drug dealer Julio Zavala by the U.S. Attorney's Office in San
Francisco in 1984 because of Zavala's ties to the Contras or intervention from the CIA;
the claim that Zavala and his associate Carlos Cabezas trafficked in drugs to benefit the
Contras; claims by former DEA agent Celerino Castillo that his investigation of drug
trafficking by Contras at Ilopango Airport in El Salvador was stymied; and allegations
that John Hull, an American citizen who owned a ranch in Costa Rica and was suspected of
drug trafficking activities, received lenient treatment from the Department of Justice
because of his alleged connections to the Contras or the CIA.

In our investigation, we directed all Department of Justice components to produce
documents from their files relating to the specific individuals mentioned in the Mercury
News and allegations of drug trafficking by the Contras. We obtained and reviewed over
40,000 pages of documents from these Department of Justice components and other sources,
and we conducted over 200 interviews of present and former Department of Justice employees
and many of the individuals that were the subject of the articles, including Blandon,
Meneses, Lister, Ross, Zavala, Cabezas, and others. These interviews took place throughout
the United States and in Nicaragua. Only a few individuals who were no longer government
employees refused to talk to us, and the OIG does not have testimonial subpoena power to
compel them to cooperate.

Our review was coordinated with the inquiry conducted by the CIA's Office of Inspector
General (CIA OIG), which undertook its own investigation focusing on the actions of CIA
employees regarding allegations of drug trafficking on behalf of the Contras. Our two
investigations were independent, however, and addressed different issues. We leave to the
CIA OIG to report its findings about the CIA's conduct in these matters; our report
focuses on the Department of Justice's role in these cases.

Our report is divided into chapters examining the cases of the individuals who were the
focus of the Mercury News articles, including Blandon, Meneses, Lister, Ross,
Zavala, and Cabezas; we also have a separate chapter on miscellaneous cases, such as that
of Hull. Although our inquiry concentrated on the Department of Justice's role in pursuing
the investigations and prosecutions of these individuals, we did, in the course of our
interviews and document review, find information touching on whether these individuals in
fact dealt drugs on behalf of the Contras or were connected to the CIA. We present this
information in our report. We also discuss the rise of crack cocaine in the United States
and the accuracy of the suggestion in the Mercury News articles about the cause of
that epidemic. Finally, we discuss the sharing of intelligence information between the DEA
and CIA about Contra drug trafficking in certain cases.

This Executive Summary briefly describes the most important facts we found and
conclusions we reached regarding the individuals that were the focus of the claims in the Mercury
News articles; it does not include all or even most of the important details and
events that the full report addresses. We believe our entire report should be read for a
fuller and fairer understanding of the results of our inquiry.

In short, our review did not substantiate the main allegations stated and implied in
the Mercury News articles. It is clear that certain of the individuals discussed in
the articles, particularly Blandon and Meneses, were significant drug traffickers who also
supported, to some extent, the Contras. There were conflicting claims about how much money
they provided to the Contras, although that support appears to be modest. We did not find
that Blandon, Meneses, or the other Contra supporters referred to in these articles
received special consideration or leniency with regard to their investigation or
prosecution by the Department of Justice because of their Contra connections. While the
Department of Justice's investigative efforts suffered from lack of coordination and
insufficient resources, these efforts were not affected by anyone's suspected ties to the
Contras.

Moreover, the implication that the drug trafficking by the individuals discussed in the
Mercury News articles was connected to the CIA was also not supported by the facts.
We did not find that the CIA or any other national security entity interceded in the cases
referred to in the Mercury News. An exception to this general conclusion was the
CIA's intervention in the Zavala case concerning the return of the seized money to him.

Finally, we found that neither Blandon's supply of cocaine to Ross nor Ross' own drug
dealing was the cause of the crack explosion in Los Angeles or across the United States,
as the articles implied. While Blandon was a major cocaine supplier and Ross was a major
distributor, the rise of the crack market, both in Los Angeles and across the country, was
not the result of any single source or seller.

Oscar Danilo Blandon, a member of a prominent family in Nicaragua, fled to the United
States soon after the Sandinistas came to power in Nicaragua in 1979. In the early 1980s,
while living in Los Angeles, Blandon began distributing cocaine, originally at the behest
of Norwin Meneses to support the Contra movement. Shortly after he began dealing drugs,
Blandon began selling large quantities of cocaine on his own for his personal profit. By
his own admission, he became a significant drug dealer, receiving cocaine from Colombian,
Mexican, and Nicaraguan sources, and selling it to Ricky Ross and others in Los Angeles
and elsewhere.

In 1986, Blandon's drug trafficking activities became the focus of criminal
investigations in Los Angeles by the Los Angeles County Sheriff's Department (LASD), the
DEA, and the FBI. In October 1986, with the help of the FBI and DEA, the LASD obtained
search warrants for more than a dozen locations connected to Blandon's drug organization.
When the search warrants were executed, however, the LASD found only a negligible quantity
of drugs at Blandon's residence.

The Mercury News articles raised various allegations about why the LASD raids
failed, including the suggestion that the federal authorities may have impeded the LASD
investigation or that the Blandon organization may have been tipped off about the search
warrants by the CIA or federal law enforcement authorities. This speculation was largely
fueled by statements made by Ronald Lister, who told the LASD deputies who searched his
home during the raid about his alleged CIA connections and suggested that his activities
were protected by that agency. In addition, the newspaper articles claimed that the
federal authorities seized the evidence collected by the LASD during its raids and
requested that drug possession charges against Blandon be dropped.

Our review did not substantiate these claims. The FBI and DEA investigators did ask the
LASD to delay the execution of the search warrants while they pursued their investigation
of Blandon, a position that was justified in retrospect. However, once the LASD indicated
its intent to go forward with the searches, the FBI and DEA fully cooperated with the
LASD, even providing information that became part of the basis for the LASD affidavit in
support of the search warrants. We found no evidence that the failure of the LASD
investigation was the result of its being compromised by the CIA or any other federal
authorities. Blandon changed his operations before the raids occurred because he correctly
believed he was under surveillance. We found no evidence to suggest that any government
officials told him about the surveillance or the search warrants in advance. We also
concluded that Lister and others made statements at the time of the raids about alleged
connections to the CIA because they apparently thought such claims would be helpful rather
than because they were true. In any event, we found no evidence that the investigators
changed any of their actions because of these unsubstantiated claims. Charges against
Blandon were dropped because of the small amount of cocaine found at his home and because
of the federal agents' plans to pursue a larger case against the Blandon organization.

In fact, three months later, in January 1987, the FBI, DEA, and the Internal Revenue
Service (IRS), in coordination with the Los Angeles U.S. Attorney's Office, opened a
federal Organized Crime Drug Enforcement Task Force (OCDETF) case targeting Blandon and
his associates. This investigation was unsuccessful and was closed in the summer of 1987
for several reasons, none of which related to the CIA or the Contras. We concluded there
were insufficient law enforcement resources assigned to the OCDETF investigation for them
to investigate Blandon's organization effectively. Second, Blandon apparently stopped his
drug trafficking activities after the unsuccessful LASD raid on his home and moved to
Florida. Finally, there were problems of coordination among the various law enforcement
entities involved in the case, particularly between the DEA and FBI regarding whether
Meneses should be used as an informant against Blandon or should be a target of the
investigation. We found no evidence that Blandon and Meneses were protected by any
intelligence agency or received any benefits because of their connection to the Contras or
any alleged connection to the CIA.

Blandon eventually returned to Southern California in 1990 and continued drug dealing
there. In 1990, another federal OCDETF investigation was opened against Blandon in San
Diego, eventually resulting in a 1992 indictment against him for conspiracy to possess
cocaine with intent to distribute it. After Blandon's arrest, he agreed to cooperate with
the government in return for a reduced sentence. Blandon was eventually sentenced to 48
months in prison, based on his substantial cooperation against drug traffickers. The
government later filed a motion seeking a further reduction in Blandon's sentence, based
on his cooperation, and the court reduced Blandon's sentence to 28 months.

The Mercury News articles suggested that Blandon was given an inappropriately
lenient sentence after his 1992 conviction, despite his "admi[ssion] to crimes that
have sent others away for life." We found that Blandon clearly received a
considerable degree of leniency, at the behest of the government, based on his substantial
cooperation. Whether the government should have given more consideration to Blandon's
prior criminal history before providing him the substantial sentence reduction, or whether
his sentence was appropriate given the extent of his cooperation, is part of a broader
debate about the leniency with which the government treats certain valuable cooperating
witnesses and informants that extends far beyond the context of this case. In our review,
we found no indication that the government's actions were based on anything other than its
assessment of Blandon's cooperation. We also found no evidence that Blandon received any
special consideration because of any alleged affiliation with the Contras or the CIA.

The OIG concluded that Blandon improperly received a "green card" -- legal
permanent residence (LPR) status in the United States. After Blandon's release from prison
in 1994, the INS agent assigned to the OCDETF investigation was given responsibility for
obtaining the necessary travel documents so that Blandon could travel to work undercover
for the DEA. Rather than pursue various avenues that would have allowed Blandon to stay in
the country while he worked for the DEA, the INS agent arranged for Blandon to obtain a
green card from an INS immigration examiner. Blandon was not eligible for a green card
because of his 1992 felony drug trafficking conviction. Although recollections differ on
what the INS agent told his supervisors or the immigration examiner who approved the green
card concerning Blandon's prior criminal conviction, we concluded that the INS agent knew
or should have known that Blandon was not eligible for the green card, and that the agent
withheld the fact of Blandon's conviction from the immigration examiner. We concluded that
the INS agent took the actions he did because he did not want to expend the additional
effort necessary to obtain the travel documents the appropriate way, rather than because
of any alleged connection between Blandon and the Contras or the CIA.

The OIG also examined Department of Justice actions with respect to Norwin Meneses,
another Contra supporter who engaged in significant drug trafficking in California,
primarily in the San Francisco area. The evidence is overwhelming that beginning in the
1970s, Meneses ran large drug trafficking operations both in Central America and the
United States. In the early 1980s, he also supported the Contra cause in California with
some contributions. The evidence we found suggested that his drug dealing was not
motivated by any desire to aid the Contra cause, but instead was for his personal profit.
Indeed, it appears that he established contacts and dealt drugs with both sides in the
Contra war, including the Sandinista government.

The Mercury News articles suggested that, despite being a known drug trafficker,
Meneses was able to enter and live in the United States with impunity, and that he was
protected because of his connections to the Contras, the CIA, or other agencies of the
United States government. According to the articles, DEA investigations of Meneses were
halted for reasons that were not clear, and when Meneses was finally indicted in San
Francisco on federal drug charges in 1989, the indictment was "quickly locked away in
the vaults of the San Francisco courthouse," and inexplicably kept secret for many
years. The articles claimed that the arrest warrant for Meneses in 1989 was never entered
into a national law enforcement database. We did not substantiate any of these claims.

Meneses was investigated several times over the course of many years. These
investigations failed for various reasons, including the same problems of coordination
between and within law enforcement agencies that arose in the Blandon case. Between 1980
and 1986, the DEA in San Francisco conducted various investigations of Meneses or his
associates. Some of his associates were successfully prosecuted, although the DEA never
obtained sufficient evidence to prosecute Meneses.

Contrary to the Mercury News claims, we did not find that these investigations
were halted because of any alleged connection between Meneses and the Contras or the CIA.
The DEA agent who initially handled the investigations told us that she believed that a
task force was necessary to investigate Meneses and his associates because it was a large
and complex organization. Her suggestion was rejected because she was working on other
cases and, she claimed, because her supervisors did not take her request seriously because
she was a female agent. In any event, there was no evidence that there was any external
pressure brought to bear on her or anyone else in DEA regarding the investigation of
Meneses.

After two of his associates were arrested, Meneses fled the United States for Costa
Rica. In 1986, he approached the DEA's Costa Rica office and offered to cooperate with the
DEA. After checking DEA's database and finding no outstanding arrest warrants for Meneses,
the DEA in Costa Rica proposed using him to introduce an experienced DEA informant to
targeted drug traffickers, including Danilo Blandon. Meneses traveled to the United States
in early 1987 with the DEA informant to meet with Blandon and other targeted drug dealers,
and then returned to Costa Rica.

At the same time, the San Francisco FBI and the San Francisco U.S. Attorney's Office
were investigating Meneses for drug trafficking. They were surprised to learn that Meneses
was being used as a source of information. The San Francisco authorities agreed that
Meneses could be used as a source of information, but insisted that he would also have to
plead guilty to a federal drug charge in San Francisco. In the spring and summer of 1987,
attempts to get Meneses back to the United States to cooperate in the Los Angeles OCDETF
investigation against Blandon, discussed above, were unsuccessful because the DEA would
not agree to Meneses' demands regarding the conditions of his cooperation. The Los Angeles
OCDETF case was eventually closed without any prosecutions.

Despite Meneses' reluctance to cooperate in the Los Angeles investigation, the DEA in
Costa Rica formally established him as a confidential informant in July 1987. The DEA
reported that several cases were initiated as a result of his cooperation, and he
travelled to the United States several times to work undercover for the DEA. In December
1989, the DEA deactivated Meneses as an informant, reactivated him for a short period in
the summer of 1990, and then deactivated him again in 1990.

In February 1989, just before the statute of limitations was set to run out, the San
Francisco FBI and U.S. Attorney's Office obtained an indictment charging Meneses with drug
trafficking offenses. The indictment was sealed because Meneses was considered a fugitive,
a typical procedure in such cases to prevent the defendant from learning about the
charges. Also, contrary to the claims made in the Mercury News articles, the arrest
warrant was entered into the FBI's law enforcement database.

Meneses was never arrested on these charges, even while he was working with the DEA in
Costa Rica and traveling to the United States on behalf of the DEA. During this time,
there clearly was inadequate coordination between the DEA, which was using Meneses as an
informant, and the FBI, which was seeking Meneses' arrest. But we did not find that this
had anything to do with any ties to the Contras or the CIA. Although there were some
rumors that he was involved with the CIA, largely fueled by his own bragging to others, we
found no evidence that this was true or that the rumors affected law enforcement actions.

On November 3, 1991, the Nicaraguan National Police arrested Meneses, Enrique Miranda,
and three others for drug trafficking in Nicaragua. After Meneses received a 25-year
prison sentence in Nicaragua, the FBI suspended any effort to arrest him. Meneses'
Nicaraguan sentence was later reduced, and he was released from prison on November 14,
1997. The San Francisco indictment against Meneses is still pending.

An important question in this matter, as the Mercury News articles noted, is how
Meneses was able to enter the United States repeatedly, despite the various investigations
of him for drug trafficking. We requested all immigration files on Meneses, but they
provide only sketchy details about his entries into the United States. When he began
cooperating with the DEA in Costa Rica, he obtained several visas with DEA assistance to
travel to the United States to work on undercover cases. According to Meneses' friends and
associates, he often entered the United States with false passports, and we found evidence
that he had access to such fraudulent documents.

In sum, we found significant evidence that Meneses was a large-scale drug trafficker
who was pursued by federal authorities for many years. None of these cases resulted in his
successful prosecution in the United States, although he is still under indictment here.
The failure to prosecute Meneses successfully was caused in part by insufficient resources
devoted to a targeted effort against him, problems of communication and coordination
between and within law enforcement offices, and a vacillation as to whether Meneses should
be considered a target or an informant. We did not find that any of these actions were
taken for improper purposes, as a result of political considerations, or because of the
influence of the CIA or other national security entities.

IV. OIG Analysis of Allegations Regarding Blandon's and
Meneses' Relationship with the Contras and the CIA

In investigating the allegations in the Mercury News articles and how the
Department of Justice handled the investigations of Blandon and Meneses, we came across
considerable information touching on their alleged connections to the Contras and the CIA.

According to the Mercury News articles, information in a 1990 trial against
deputy sheriffs from the LASD for corruption "indicates that the drug ring of former
Nicaraguan government official Danilo Blandon was connected to the CIA and efforts to
launder drug money to finance anti-communist Nicaraguan rebels." During this trial,
the prosecutors filed a motion attempting to preclude the defense from raising the claim
that the CIA was involved in laundering drug money, not because the prosecutors believed
there was any basis for such a claim, but because the claim was irrelevant to the issues
at trial. The court granted the government's request, stating that it "could not
conceive of any theory under which that evidence would be admissible" and calling
defense counsel's behavior "very unprofessional." We reviewed the documents
related to this defense claim, including documents seized from Blandon's and Lister's
residences during the 1986 LASD searches, and found that they did not prove the claim made
by the defense counsel.

The Mercury News asserted that Blandon, in testifying before a federal grand
jury in San Francisco in 1994, "implied that his cocaine sales were, for a time,
CIA-approved." Although Blandon's statement in the grand jury was subject to
misunderstanding because of the way he expressed himself, the transcript of the proceeding
does not support the conclusion that Blandon's drug dealing was connected to the CIA.

In reviewing FBI and DEA files on Blandon and Meneses, we found some reports containing
rumors that Blandon, Meneses, or their associates may have been connected to the CIA.
These records also indicate that when the DEA or FBI contacted the CIA about such claims,
it responded that there was no such relationship and that it had no objection to the
prosecution of these individuals. Our investigation found no evidence reflecting that
either Blandon or Meneses was in fact connected to the CIA.

In addition to interviewing Blandon and Meneses, we interviewed many people connected
to Meneses or Blandon concerning their alleged drug dealing on behalf of the Contras.
These accounts were conflicting but generally indicated that Blandon and Meneses engaged
in large-scale drug trafficking in the 1980s and also provided some modest monetary
support for the Contras. How much they contributed to the Contras is unclear. We believe,
based on the evidence we gathered, that their role in the Contras was marginal. Both gave
some proceeds from their drug trafficking to the Contras in the early 1980s, but the
monetary amounts appear to be relatively insignificant compared to the money they made in
drug trafficking.